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Understanding Basic Financial Terms

Single dads (fathers) looking for financial help sometimes have no idea where to start. Also, as you are looking for that financial assistance you start to hear terms getting thrown around that you may never have heard before. You may hear terms like rate and yield but, do now know what they mean and the financial context. Please do not get discouraged. In the paragraphs below we will help demystify some of the basic financial terms for you.

APR is an acronym for Annual Percentage Rate. This is most commonly used with loans. APR is a mathematical formula that is very complex which will also include the other charges on the loan as well as the percentage rate. There are many people whom confuse this letter A in the acronym to stand for adjustable. That is wrong. Adjustable is used with the acronym ARM which stands for adjustable rate mortgage.

APY stands for annual percentage yield. This one is pretty straightforward but, this one does mean a lot to you. APY is defined as the total amount of interest you receive in exactly one year. It normally refers to the amount paid to the depositor by a financial establishment.

Compounding in the financial context is defined as more interest is added on top of the interest that you have already earned. So when you hear the term compounding interest is means that from that moment on, the interest that was additional will also earns interest itself.

Yield is the amount of interest that you would earn after the savings rate has been compounded. Or an easier way to say it is it describes the total in cash that returns to the owners. The term yield is used a lot in finance so make sure that you understand which definition they mean depending on the context of the sentence it was used in.

Rate in financial terms is what you would earn on a Certificate of Deposit (CD) or your savings account before the interest compounds. Or it can be the interest that you are charged on a loan.

Index is a well common standard. It is used for the prime rate for a financial establishment to set the interest rates. Any rate that you would have to pay would shift higher or lower depending on the changes to the index.

To conclude, getting financial help does not always have to be a painful task that would have you begging. Sometimes you can give yourself some financial assistance by just educating yourself and becoming engaged in your own personal finances. We hope the paragraphs above have helped you on your way to getting your finances in order and helped you understand the financial puzzle.


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